A study of the different aspects of staff retention strategies

Contend

1. Abstract

2. List of Figures and Tables

3. Contend

4. Introduction

5. Aims and Objectives
5.1. Research Aim
5.2. Objectives:
5.3. Justifying the study
5.3.1. Increasing Competition for the Best Employees
5.3.2. Employment turnover rates
5.3.3. Tendency towards early retirement
5.3.4. Summary

6. Literature Review
6.1. Introduction
6.2. Explicit vs. Tacit knowledge
6.3. The knowledge chain
6.4. Knowledge Management
6.4.1. Knowledge Acquisition
6.4.2. Knowledge Innovation
6.4.3. Knowledge Protection
6.4.4. Knowledge Integration
6.4.5. Knowledge Dissemination
6.5. Components of the knowledge management infrastructure
6.5.1. Knowledge worker recruitment
6.5.2. Knowledge storage capacity
6.5.3. Customer/supplier relationship
6.5.4. Summary
6.6. Herzberg’s two factor theory
6.6.1. Satisfaction (Motivation)
6.6.2. Dissatisfaction (Hygiene)
6.6.3. Two Dimensions
6.7. ERGO Theory
6.8. X and Y Theory
6.9. Summary

7. Methodology
7.1. Introduction
7.2. Research Philosophy
7.3. Research Strategy
7.3.1. Case Study approach
7.3.2. Research Design
7.3.3. Investigation Procedures
7.3.4. Secondary research
7.3.5. Interview Analysis
7.3.6. Summary

8. Analysis
8.1. Objective one: The retention strategies
8.1.1. ACT AG (Angewandte Computer Technologie AG)
8.1.2. Kreissparkasse Köln
8.1.3. DKV (Deutsche Krankenversicherung)

9. Conclusion
9.1. Objective two: The retention strategies in a comparison
9.2. Objective three: Drivers of staff retention
9.2.1. Retention strategies and Herzbergs two-factor theory
9.2.2. Knowledge chain and value analysis

10. Recommendations
10.1. Objective four: Future staff retention strategies

11. References

12. Bibliography

13. Appendix
13.1. Appendix 1: The hierarchy of needs theory
13.2. Appendix 2: Shared Vision

Abstract

The main capital of knowledge companies is the knowledge of their employees and they are the most valuable assets to many knowledge companies. Many companies use different retention strategies to keep these employees in the company. The focus of this research is to examine and compare the different tools used in strategies of staff retention in different knowledge companies in Germany. Three different types of companies are investigated and the strategies they have in place are studied. A collection of the strategies is mad. These strategies are then set into relation to the value an employee has for a company using a knowledge value chain approach. In a second step the different outcomes from the research are compared with each other and set into the individual business context of the different companies. From this context the drivers for the different sets of retention strategies that are in place in the different companies are examined. From results recommendations for future strategies of staff retention are drawn.

2.List of Figures and Tables

Figures

Figure 1:Knowledge value chain model

Figure 2: Nonaka: The knowledge Creating Organisation

Figure 3: Knowledge Chain Optimisation Approach

Figure 4: The hierarchy of need pyramid by Maslow

Figure 5 Integration of objectives

Tables

Table 1:Advantages and disadvantages of to research philosophies

Table 2: Major differences between deduction and inductive approaches to research

Table 3: Comparison of the ACT, KSK and DKV

4.Introduction

The main capital of knowledge companies is the knowledge of their employees. More and more staff working in knowledge companies do not work “physically” at the company’s office. Very often, this staff stays at offices provided by the customers. In certain cases, the staff does not see their employers organisation for months and sometimes they do not even have contact with their employer’s organisation or their “real” colleagues for months This is especially true for consultancy and insurance companies. The result is that these kind of knowledge workers tend to develop a bigger commitment and psychological bonding with the customer’s organisation than with the employing company that pays their salary.

The same process of commitment can be seen from the customers’ perspective in consultancy companies. Very often a customer ‘buys’ a knowledge worker for a special task. Often the knowledge worker stays much longer than the original task lasts. After a certain time the knowledge worker is integrated in the customer’s organisation and has taken responsibility for things other than the original task. He becomes ‘part of the furniture’. It is not unusual in such cases that the customer tries to entice away the knowledge worker. This happens regardless of contract penalties. For knowledge companies, as for companies in similar business environments it is therefore of vital importance to develop and implement a strategy of staff retention.

The focus of this research is to examine the different tools used in strategies in staff retention in different companies and how successfully they are implemented in knowledge companies. Three different types of companies will be investigated as case studies. They are different in size and their main field of business activity. The case studies focuses on three different organisations, the ACT AG a middle-sized consulting company, which is specialised in IT consulting organisations in the financial and public sector, the Kreissparkasse Koeln (KSK) a local Bank with about 160 branches and the Deutsche Krankenversicherung (DKV) a international insurance company.

The aims and objectives of this research will be investigated from both viewpoints, the management and the workforce. It will be of interest how the different tools used in staff retention strategies work and what their main drivers are. All three companies will be compared regarding these matters.

From the feedback received, any suggestions for the future use and implementation of tools used in strategic of staff retention will be evaluated and suitable conclusions will be drawn and appropriate recommendations made.

5.Aims and Objectives

5.1. Research Aim

1. To identify, investigate and compare the tools of staff retention on a small, medium and a large knowledge organisations in different industrial sectors, and draw recommendations for future staff retention strategies based on the findings of the research.

5.2. Objectives:

2. Identify the different staff retention tools used in different size companies.

3. Investigate the most important drivers in the different staff retention strategies in a comparison of the selected companies.

4. Compare the different companies in respect of the implementation of tools of staff retention.

5. Draw conclusions and make recommendations for future staff retention strategies based on the findings of the research.

5.3. Justifying the study

5.3.1. Increasing Competition for the Best Employees

Figures published by the “Statistisches Bundesamt Deutschland” suggest that the number of youths will decline from currently 17 Million, (21% of the total population) down to 12 Million, (16 %) in 2050 in Germany. This trend is not new and can be seen in the last 30 years. But with the increase in lifetime expectation the group of people aged 60 or over will double to 28 Million or 37 %. (www.destatis.de)

In order to maintain the current worker/pensioner ratio, the minimum annual growth rate required is 3,6%. This suggests both an aging population (Ellison, 2000), and also the inability of Germany to replace its workforce in the long-term.

If the birth rate continues to decline and the number of pensioners increases, it is also important for the workforce that the skilled workforce increases. This implies the supply in the labour market is lower than the demand in the economy. The importance to all successful organisations is the need to attract, retain and develop the knowledge of employees in order to protect the future downside of increased competition in the labour market. Systematic retention strategies are central to both, the retention of the workforce and the retention of knowledge within the organisation.

5.3.2. Employment turnover rates

Warwick (2002) suggests the emergence of a “nomadic workforce”, in particular, graduate workers especially in the first 10 years show a trend towards changing jobs every two years. The five-years rule suggests if an organisation can retain a worker for five-years, they are more likely to remain with the company over the long-term. Therefore the development of systematic retention strategies to nurture and develop workers throughout their organisational lifetime would ensure maximum return from these workers.

5.3.3. Tendency towards early retirement

Even so there is a actual debate in Germany to extend the work life time and set the retirement age to 68, Germany is facing a scenario where the number of people aged over 60 will begin to surpass the number of under thirty year olds (www.destatis.de). If this trend is coupled with the increasing tendency towards early retirement, the most senior, experienced and skilled employees will be leaving the organisation and taking their extremely valuable industry knowledge with them (Seltzer 1999). Consequently the German economy will suffer from the knowledge deficit. This necessitates a review of the strategic approaches to keep skilled workers in the organisation.

5.3.4. Summary

There has been an emerging trend towards developing the human side of organisations for competitive advantage (Morris, 2000).

Key to this is the leveraging of worker knowledge and expertise to increase productivity and profitability. Keeping a skilled and motivated workforce and not loosing built up knowledge to competitors is of increasing importance to organisations

The key justifications for this study are: increasing competition for the best employees; increasing employee turnover rates; and a tendency towards early retirement creating organisational loss of knowledge.

Literature Review

6.Literature Review

The literature Review will focus on two different topics, the first one is knowledge, the differentiation of knowledge, and the role knowledge plays in a knowledge value chain. This is due to the fact that retention strategies are especially important for knowledge companies. Having a closer look at the knowledge value chain gives the opportunity to see how much value an employee produces for the company and therefore gives hints how valuable the employee is for the company. This is done to get a deeper understanding of the different environments, in which the different retention strategies are implemented.

The second focus of this literature review is fixed on the topics of motivation to gain a deeper understanding of the social theories behind retention strategies. To gain this understanding a review of the theories such as Maslow, Herzberg, McGregor and McCalland will be given. Therefore their main theories, such as Herzberg’s two factor theory, the ERGO Theory and the X and Y Theory will be reviewed.

6.1. Introduction

The way competitive advantage is seen in the business world has changed in recent years. In the past, the view of companies was that they were physical entities, utilising tangible inputs to produce and market tangible outputs (Roos and Van Grough, 1996) With the growing trend towards service sector industries, the physical evidence of business transaction is getting less important. Organisations do no longer only be differentiated through costs and quality of their products, but the hard-to-replicate concept of intellectual capital (Teece, 2000)

To understand the importance and role of intellectual capital in the production process and therefore the importance of retention strategies as an essential success factor of a company, in a first step using the knowledge chain as a framework the social and mechanistic approaches that lead to increasing productivities in knowledge companies will be investigated.

Providing value to the customers is the goal of any organisation. Within an industry, different product types provide different types of value. The classical value chain is seen as a set of activities that create a product’s value to the customers (Alter, 1992). The value chain concept has been used by Michael Porter and others to analyse the nature of industrial competition (Porter and Millar, 1985). Combining several views of the value chain into one version highlights possibilities to use information systems competitively. Therefore, they have applied the concept of value chains to information systems. This is even more important as there are more and more businesses that only produce information for example insurance companies. Employing Porter's value chain analysis approach, Ching Chyi and Lee, Jie Yang developed a knowledge value chain model. (Yang and Lee, 2000)To better understand the model and the approaches to increase the productivity a closer look at information and knowledge has to be made.

6.2. Explicit vs. Tacit knowledge

Knowledge can be divided into two different groups.

In the process-centred (tacit) approach knowledge is closely linked to the person who developed it and is shared mainly through person-to-person contacts. Tacit knowledge is the experience of a person and can only be extracted to a certain extend. The best way to transfer it from one person to another is trough a long process of apprenticeship. Tacit knowledge is the skills and "know-how" we have inside each of us that cannot be easily shared (Lim, 1999)

In the product-centred approach (explicit) the focus is on knowledge documents, their creation and reuse in corporate memories. Explicit knowledge therefore resides in documentations, formulae and textbooks. Explicit knowledge is the only knowledge that can be stored in any technical knowledge management system. According to Taylor “the strength of the workers lay in the fact that it was they that had far more knowledge and understanding of jobs” (Beardwell and Holden, 2001)

6.3. The knowledge chain

The knowledge chain consists of a knowledge management infrastructure and the knowledge management process's activities and knowledge performance. These infrastructure components and activities are the building blocks by which a corporation creates a product or provides service valuable to its customers.

illustration not visible in this excerpt

Figure 1:Knowledge value chain model (Yang and Lee, 2000)

In a first step the different knowledge management processes will be analysed and the knowledge infrastructure will be explained

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